1995–2000: Major expansions
In September 1995, Gateway 2000 commissioned the construction of a manufacturing facility in Hampton, Virginia, worth between $18 million to $20 million and an overseas manufacturing plant in Malaysia to serve computer buyers in East Asia.[15][16] In August 1995, the company purchased an 80-percent stake in the Australian Osborne retailer,[17] and in the following November, Gateway 2000 established their first website on their first Internet domain, gw2k.com.[18] By the end of the year, Gateway 2000 posted revenues of $3.7 billion.[19] In 1996, Gateway 2000 introduced the Destination 2000, an early home theater PC that used a large-screen CRT television as its monitor. It was intended for consuming home media content and multimedia software and came with a built-in modem for Internet connectivity. The Destination 2000 sold poorly, and after several months Gateway began offering these systems at retail outlets such as CompUSA at deep discounts.[4]
In March 1997, the company opened up a number of brick-and-mortar retail locations, called Gateway 2000 Country Stores, in various suburbs across the United States. Gateway Country Stores did not stock any of the company's products but had a number on display to allow customers hands-on experience with Gateway 2000 computer systems; customers had to order by phone or through the company's new website. Their first location was in Tampa, Florida.[20] By 1999, Gateway 2000 had opened up over 140 Country Stores.[4]
In April 1997, Compaq Computer Corporation was in talks to purchase Gateway 2000 to bolster the former's presence in the mail order market.[21] The deal was nearly signed, with Gateway set to receive $7 billion, before Waitt vetoed the acquisition that summer.[22] Gateway 2000 themselves acquired two companies in the year, the first being the Amiga Technologies subsidiary of Escom AG, a German company that had filed for bankruptcy in the preceding year. Announced in March 1997,[23] the deal was finalized in the following May, with Amiga International, Inc., incorporated as a subsidiary of Gateway 2000 in South Dakota.[24] Gateway 2000 paid Escom $13 million for the patents to Amiga technologies, the majority of which centered on multimedia capability.[25] In June 1997, Gateway 2000 acquired Advanced Logic Research, Inc.
In late 1997, Gateway 2000 began phasing out the use of cows in their branding in an attempt to project a more mature image to their corporate clients.[27] Simultaneously, the company formed Gateway Major Accounts, a subsidiary focused on fleet sales to enterprise clients.[4] By 1997's end, the company posted $6.29 billion in revenue and $1 billion in profit.[28]
In 1998, the company began dropping the "2000" from their moniker, as the coming turn of the millennium meant that "Gateway 2000" would soon sound antiquated.[29] The company was formally reincorporated as Gateway, Inc., in May 1999.[30] Also in 1998, Gateway moved their headquarters from South Dakota to La Jolla, San Diego, California—both because Ted Waitt himself wanted to move to California and also to move the company closer to top executive talent at the center of the technology industry.[4][31] The move was a success in this right, with a new slate of executives hired in 1998, including Jeff Weitzen, a veteran of the AT&T Corporation who was named president and chief operating officer of Gateway.[31]
The new management planned to refocus the company's bottom line toward providing information technology services and software, enterprise finance and training, and consumer hardware peripherals, as the market for selling only computer systems had been seeing continually shrinking profit margins.[4][31] As part of this expansion, Gateway also established their own Internet service provider, Gateway.net, offered exclusively to their customers and competing with the likes of America Online (AOL). Beginning in June 1998, Gateway bundled Netscape Navigator web browser on its systems preinstalled with Microsoft's Windows 95 and 98, the latter of which Microsoft themselves bundled with their own web browser, Internet Explorer.[32]
Gateway.net saw slow adoption rates—there were only 200,000 subscribers in early 1999—and was outage-prone. In February 1999, Gateway switched from Web America Networks to MCI WorldCom as their Internet backbone.[33] Also in that month, Gateway began offering one year of free Gateway.net service to those who purchased a Gateway PC worth $1,000 or more.[34] The base of subscribers increased threefold to 600,000 by October 1999 as a result of the promotion. In October 1999, Gateway switched their Internet backbone again to AOL, the latter taking over all operations of Gateway.net in exchange for a $800 million stake in Gateway.[35]
Ted Waitt resigned from his position as CEO of Gateway in December 1999. Weitzen was named president and CEO, while Waitt retained chairman of the board.[36] One of Weitzen's first acts as CEO was approving the divestiture of Gateway's Amiga International division, selling the corresponding Amiga patents and trademark rights to Amino Development Corporation, who later renamed themselves Amiga, Inc.[37]
